Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 Cooper Companies Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. Please go ahead.

Good afternoon, and welcome to Cooper Companies' First Quarter 2026 Earnings Conference Call. During today's call, we will discuss the results and guidance included in the earnings release and then use the remaining time for questions. Our presenters on today's call are Al White, President and Chief Executive Officer; and Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements, including statements relating to revenues, EPS, cash flows, interest, FX and tax rates, tariffs and other financial guidance and expectations, strategic and operational initiatives, market conditions and trends, and product launches and demand. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions of the company to differ materially from those described in forward-looking statements are set forth under the caption Forward-Looking Statements in today's earnings release and are described in our SEC filings, including Cooper's Form 10-K and Form 10-Q filings, all of which are available on our website at coopercos.com. Also, as a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP information. We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release, which is available on the Investor Relations section of our website under quarterly materials. Should you have any additional questions following the call, please e-mail ir@cooperco.com. And now I'll turn the call over to Al for his opening remarks.

Thank you, Kim, and welcome, everyone. We're pleased to report a strong start to the fiscal year, highlighted by product launches, outstanding profitability and robust cash flow. These results reflect our disciplined execution combined with the significant synergies we're realizing from last year's reorganization. For today's call, I'll begin with an update on the 3 key strategic priorities we outlined in December and then move to Q1 results and guidance. First, we remain focused on delivering consistent market share gains for CooperVision. In calendar 2025, we gained share for an 18th consecutive year, and we enter 2026 with the intention of doing so once again. In our first fiscal quarter, we made meaningful progress with the global rollout of our premium MyDay daily silicone hydrogel portfolio, growing branded sales and executing on private label contracts. Regionally, the Americas and EMEA strengthened and have excellent commercial momentum. Japan weighed on our Asia Pac results, but we're executing on product launches and investing to restore growth in the region. We're also incredibly excited about the early adoption of our MyDay MiSight launches in EMEA and MiSight in Japan. At CooperSurgical, we're encouraged by improving trends in our fertility business and look forward to positive momentum continuing. Second, our commitment to delivering strong earnings and free cash flow through operational excellence was clearly evident this quarter. The organizational changes and IT implementations we completed last year are generating meaningful synergies, providing us with the opportunity to invest in sales and marketing initiatives while still delivering outstanding financial performance. Q1 earnings exceeded the top end of our guidance range, and those earnings translated into a healthy $159 million in free cash flow. Given our strong start to the year, we're raising guidance for both earnings and free cash flow. Third, we continue to maintain…

Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis, so please refer to today's earnings release for a reconciliation of GAAP to non-GAAP results. For our first fiscal quarter, consolidated revenue was $1.024 billion, up 6.2% year-over-year and up 2.9% organically. Gross margin was 68.1%, exceeding expectations driven primarily by a lighter mix of low-margin Asia Pac revenue at CooperVision. Excluding the impact of tariffs, gross margin would have been essentially flat. Operating expenses rose only modestly and improved as a percentage of sales, declining from 43.6% to 41.2% year-over-year, reflecting the benefits of the reorganization executed in fiscal Q4 of last year. These efficiencies stem from the structural changes we've made as we transition to a smaller, more efficient organization that leverages technology including AI to automate work and optimize shared services. The impact of these efforts was particularly evident at CooperSurgical, where expenses decreased year-over-year. Operating income increased a healthy 13.9%, resulting in a 26.9% margin. Interest expense was $22.4 million, and the effective tax rate was 15.1%. Non-GAAP EPS grew 20% to $1.10 with roughly 197 million average shares outstanding. Free cash flow was very strong at $159 million with CapEx of $102 million. We deployed this cash by repurchasing 1.1 million shares of stock for $92 million, making the final $50 million payment related to our 2023 Cook acquisition and applying the remaining balance towards reducing net debt to $2.4 billion. Lastly, in February, we addressed our $1.5 billion term loan maturing in December 2026 by amending and extending $950 million for another 5 years to February 2031. The remaining $550 million will be repaid in December 2026 when it matures using our strong free cash flow and ample revolver capacity. Moving to full year fiscal 2026 guidance.…

[Operator Instructions] Our first question comes from the line of Jeff Johnson with Baird.

I guess the first question, let me just kind of back out and go more higher level. Al, I mean, you reported a 10% calendar 4Q number. I think over the last 3 quarters, you've been about 3%, 3.5% for CVI. So one, can you reconcile that 10% number versus the last few quarters at 3%? What's different in the number you're citing there versus what we see in your CVI organic growth results? And then one follow-up question.

Sure. I knew we were going to get that one. It's literally just a matter of months and shipment of products. So we had, had a weak November and December of 2024, and we had a really strong January of 2025. So just when you comped against that, the way that the shipments worked, it resulted in a really strong calendar Q4 for us.

Fair enough. And I guess, again, maybe I'll go even further out, and apologies for the feedback. But you've been talking about kind of getting back to market growth, above market growth at least as you report CVI. How is that plan going so far? Maybe update us on the MyDay -- clariti to MyDay transition. Just in general, it still feels like your results are maybe lagging the market here a little bit relative to some of your peers. So how do you feel like you're doing in kind of getting back up and into above market over the next couple of quarters?

Great question, Jeff. I'll break that up a couple of different ways. I mean if I look at the Americas, we're doing well. The U.S. had a good quarter. We're gaining a lot of traction. We've got product launches and a lot of activity. The team is doing a fantastic job. So I would say we're in good shape with the Americas. When I look at EMEA, again, in good shape there. We took a step forward this quarter against last one, but we've won a number of contracts there. We have a number of product launches going on. I would say our -- we have better visibility for that market right now to improving sales. So I feel pretty good about the momentum that we have in the Americas and the momentum that we have in EMEA right now associated with MyDay and clariti, frankly. And then I go to Asia Pac as kind of the third one. And the results there, right, have been a little tough for us. And that's the area that we need to get figured out and get back to kind of our old traditional growth rates, and we'll be in fantastic shape. As I mentioned, we're doing a lot of stuff to drive growth in Asia Pac. We did see success kind of in a number of areas where we've had problems. We stabilized when it comes to a lot of the e-commerce stuff that we talked about. We stabilized the China business. We had a changeover of some personnel, a number of leadership positions. So we're in good shape in a number of countries. The one that we kind of have left right now is Japan, and I can target that down to like Japan, older hydrogel products where some of our competitors are taking some share. We have not caved on price or anything along those lines. So I think we're going to continue to have a little bit of pressure in Japan with traditional hydrogels, again, in the next quarter because I think that the region will probably be down because of it. But then all of that success, the stuff that I'm talking about, all those product launches in Asia Pac, the success of executing on those private label contracts, all of that kind of stuff, the transition point on that happens in Q3, and you're going to have Asia Pac growing again. So another one where, I would say, we had a number of points over the last year and just a lot better, a lot clearer visibility right now on where those challenges are and where the successes are going to come from. So I think fiscal Q2 ends up being a step-up certainly from this quarter. And then as I've said all along, we'll be back to rolling in Q3 and Q4.

And from Wells Fargo, our next question comes from the line of Larry Biegelsen.

That was a new pronunciation. Al, we heard your comments about the Middle East and IVF. Maybe you could just level set us on what your exposure is there? And how you're thinking the war might impact your business? And I have one follow-up.

Sure. Yes, to put some numbers around that, kind of, for us, on a consolidated basis, the Middle East is about 2% of our sales. A lot of it is distributor. And obviously, the Middle East is a very large region, so it won't have that much of an impact on us other than it could impact fertility because there's a decent amount of fertility business. We're #1 in that region. We've good strength there. So it's just a matter of us being able to get products there. I mean women are obviously still going through fertility treatment and so forth there. We have to be able to get product in. So if that situation extends for a period of time, it will be more challenging for us. Even with that, we're still -- we have a lot of good momentum in fertility, and I think we'll still improve quarter-over-quarter. But that's kind of the one question mark. Otherwise, I'd even be more bullish on fertility.

And Brian, the margins were really strong in Q1. Just remind us how we should think about the phasing for the year, how you're thinking about -- I guess the tariffs, you said no change. But in light of the recent Supreme Court ruling, if that stood, would there be upside on tariffs?

Sure, Larry. I'll start with the second part of your question, at least as it relates to tariffs. We've assumed $24 million in the year. That's what we assumed as of the last guidance. We're going to sit tight. Obviously, we capitalize and release the impact of tariffs 4 months later, so any change to tariff rules or guidelines or whatever takes effect won't impact us until later in the year. But a 10% tariff makes very little impact. It's pretty similar to the $24 million, so I'd assume that. If it goes up to 15%, that could be somewhere upwards of like $4 million. But for now, we're just -- the 10% is what it is, and that's what we factored in the guidance. As it relates to operating margins, yes, I mean, it's the same story that we've been talking about from exiting last quarter. We're getting really durable savings from the synergies and the elimination of fixed costs from the reorganization that we talked about in Q4. We're leveraging prior investment activity, and we're being really disciplined. We're scrutinizing all nonrevenue-generating expenses, particularly the back office, and we're investing in sales and marketing. So the drop-through in operating margins was good in Q1, and I would expect you're going to continue to see stronger operating performance, which is why, frankly, we raised our guidance $0.13 at the bottom end and $0.10 at the midpoint based on stronger operating performance. But I'm not going to get into gating at this moment.

And from Piper Sandler, our next question comes from the line of Jason Bednar.

Actually want to pick up on the line of question that Jeff had, but as far as the competitive landscape as it stands today and your share position, maybe talk about, Al, new fit activity across the quarter. Just what are you seeing in the data when you look at your performance versus peers, if you can break it down dailies versus monthlies?

Sure. If I look at new fit activities, it probably hasn't really changed that much. At the end of the day, we're taking wearers, so the fit activity continues to put us in a good position. Now you have a whole lot of other variables that go into it, I would say. But if I narrowed down to just new fit activity, whether it's dailies or FRPs, we are taking wearers in both of those as we did this past quarter. So I feel good about that as kind of continuing to be a good indicator of the future.

All right. And then as a follow-up, it really seems like industry pricing dynamics have calmed down, at least relative to where we were last year. It sounds like the latest round of increases here the last few months are sticking, it should be good for all the players out there. How are you thinking about future list price increases and managing these discussions with wholesalers and docs? Especially if I think back, we went through multiple increases in the past few years, usually like 2 increases a year, do you think the market can absorb more than 1 price increase a year without negatively affecting demand here going forward?

Yes, well, I do because of the technology that's coming out. I mean, as an industry, we're launching new products, really innovative products. We have some great ones ourselves. I mean there's nothing more innovative in the contact lens industry today than MyDay MiSight that's launching out there. But the multifocals that we're launching are great products. Energys is a great product. I know some of our competitors have some products out there that they're launching at good price points. So consumers are willing to pay for that high quality, and contact lenses are not particularly expensive at the end of the day. So the positive pricing that you're picking up on, on your comment is true. I'm happy about or I feel positive about pricing in the marketplace right now. The only region I put a little caveat on that is still in Asia Pac. There's definitely markets in Asia Pac where there's some pretty competitive pricing out there. But yes, generally speaking, I'd say pricing is positive right now, and it's appropriate given the technologies that are rolling into the marketplace.

And from Stifel, our next question comes from the line of Jon Block.

Al, the CVI number, I think I heard you at 3.3% precisely. It was a bit below expectations, even the bottom end of the midpoint. Like you gave that guidance, call it, first or second week in December. So maybe just talk to us -- again, it was slightly below. But what deviated from expectations relative to when you gave it? And it would seem to suggest that maybe January was a little bit weaker than you expect. So can you give us any color on how things trended into February? And yes, sorry for the awful feedback.

Yes. No, you're right, Jon, because we were looking at Asia Pac being essentially flat for the quarter, kind of similar to what we did in Q4, and that would have meant CooperVision consolidated growth would have been like 4.3%, something like that. And you're right, it was 3.3%. So that delta was very specific and very targeted, if you will, to what happened in Japan on those legacy products. I mean we started seeing it some in December, and then we definitely saw that activity in January. So that's what happened. That's where it picked up. I thought that, frankly, the momentum we have with all the product launches and activity and everything would overcome that. But yes, that was a decent hit for us as we rolled through December and January. You're right. And that's why I said I think Asia Pac will probably be down one more quarter before all the positive energy that we have kind of overwhelms that, if you will.

Okay. Fair enough. And second one, and I apologize in advance for sort of the boring question. But Brian, when I look at the add backs in the quarter, almost half of the add backs were from -- like a hit from natural causes in litigation, which is just a little uncommon. It didn't seem to be the case in the prior quarter. So any color on what you can give around the add backs if you can elaborate a bit?

Jon, I think you're talking about just in the other category where we break out -- I think it was $6.7 million was related to other legal-related matters. I mean our stance is not typically to talk about what legal matters are going on. We obviously have insurance for a number of things, but there are some things that we don't have insurance on, where we're defending ourselves or -- we've got some legal-related matters that show up. So it was a little bit higher this quarter, but not too atypical from years past.

From Jefferies, our next question is from Young Li.

Great. I guess to start, I was wondering if you could talk a little bit about there's an update on sort of how the supply dynamics have impacted your ability to win new contracts in the quarter.

Supply dynamics?

Impacted your ability to win.

For supply, you're probably referencing some of the MyDay capacity. We don't have those issues anymore. So I would say that when it comes to supply constraints, manufacturing or supply constraints or logistic challenges, I am very happy to say those are in the rearview window now. We don't have those challenges anymore, so that's not impacting us.

Apologies for the sound quality. I don't think you heard the question fully. But I was just wondering if you were able to win more new contracts this quarter just given the improvement in supply.

I got you. The answer to that is yes. Yes, we did win a number of new contracts. As a matter of fact, we won them in all 3 regions, and they were definitely MyDay related. So we won a bunch kind of last year and as we were exiting last year, but we've continued to expand relationships and partnerships and win additional MyDay business. So yes, we have.

Okay. Great. Very helpful. And then I guess to follow up, I wanted to get a little bit of color and update on Paragard. It's a high-margin business, although we know about the volume, pricing dynamics. Are there any incremental updates on the competitive front just given the potential for impact on the profitability side?

I would say no updates. As far as I'm aware of, that licensing agreement that you referenced on the competitive side has not closed, so I don't have any updates or any details on any of that. I think for us, Paragard was minus 7% for the quarter. We're still expecting that to be flat to up a little bit for this fiscal year. And then we'll see how that plays. If that deal actually does happen, and then we'll give some color on their launch plans and so forth. But right now, I don't want to speculate on any of that.

And from Barclays, our next question is coming from the line of Matt Miksic.

I hope this is coming through okay. But one question just following up on the market. There was some kind of unusual trajectory during last year in terms of the market dynamics. Based on your best guess and what you saw, I guess, during and exiting Q4 on a calendar basis, do you think that's improving now? Do you think we're stable? Any further color on what the ups and downs were from last year? And then I have one follow-up.

I think I would say we're at least stable, if not improving a little bit. We did have, as a contact lens industry, a softer year last year, but it's at least stable. The reason I say improving, as I sit here thinking about it on the top of my head, right, is because of pricing that somebody asked about earlier. I'm trying to look at the market and say, hey about 1% is going to come from price, about 1% will come from wearers, and then you'll have all the other stuff, the shift to dailies and so forth that's happening that will drive it. That 1% that's coming from price, I would certainly stand by that, and it could be potentially a little bit better than that. So I do think the market is well positioned for a decent year. That would be like a rebound of what it was years ago, but it's going to be a better year, I think, in 2025 than it was in 2024.

Got it. And then just a follow-up on some of the dynamics that are driving growth rate next quarter and the quarter after. You mentioned Japan is down in this quarter, improving by the third fiscal quarter, I think. How should we think about the impact of some of these private label engagements that you announced and mentioned that you were able to close some more? When do those -- or did you notice those coming in this year? Do they just kind of filter in and support sustainable growth? I mean how to think about it because it just seemed like there was quite a number of them that you signed, and I'm just wondering if that's something we're going to notice as we get into the middle and back half of this year.

Good question. And yes, we are executing on those private label contracts and a number of branded contracts that we won. And you will see those as we progress through the year. They got masked this quarter because of what happened in Japan as I was saying. Otherwise, we would have been kind of 4.3% somewhere, 4.4% somewhere around there. But we are executing and doing well on those contracts. So the way I see it playing out is we continue to execute on those contracts, and we have good visibility on that. That's going to result in a better Q2. But as I've said all along, it's going to be Q3 and Q4 is when all those contracts and those launches really start coming together for us. So I just think that we kind of have 1 more quarter behind us of some of the challenges that we were dealing with, and we have 1 more quarter here in the quarter that we're in, where we have some residual challenges in Asia Pac still putting up a step in the right direction in Q4. But then we get back to kind of the CooperVision of old and the more consistent solid revenue growth rates in Q3 moving forward.

Our next question comes from Bank of America from the line of Travis Steed.

I guess the first question I have is on kind of Q2 revenue, kind of where you want the Street to shake out and kind of the cadence for revenue growth for total company and CooperVision and CooperSurgical. We heard the comments on Japan. I don't know if there's any other dynamics that you'd point to that we should model for Q2.

Well, I think if I look at it that way, I'd say we'll probably have another good quarter I would expect in the Americas. I would expect EMEA to be a little bit better. than it was this quarter. And Asia Pac is the question mark to me. It will be down a little bit in total. So I would assume that the Q2 results are a little bit better than what we did here. I would look at surgical pretty similar. Fertility should be a little bit better even with some Middle East risk out there. And the rest of that business is coming along fairly well. So I would think CooperSurgical will post a little bit better sequential quarter than what they did in Q1.

On the second question, I wanted to ask on the strategic review. When do you expect that to be complete? What's the goal for the outcome? Anything else you could kind of say on the strategic review would be helpful.

Sure. There's really not much else I can add on that. I mean we announced that we were doing that kind of formally, if you will, beginning of December, went through the holidays and so forth. And we're very active on it right now with our advisers and the Board and so forth. So I don't want to comment or say anything right now. It probably wouldn't be appropriate to go into any details until we get some concrete information. So I'll hold off on that one but certainly provide updates when we can.

Our next question comes from Mizuho Group from the line of Anthony Petrone.

Maybe one on private label and then one on MyDay MiSight. So on private label, I don't know if you can share this, Al and/or Brian, but what was the percent of private label exiting last fiscal year? And with the addition of these new private label contracts, where can that increase to? And is that margin neutral? Is it a margin drag? Or can it be accretive to margins? I have a one quick follow-up on MiSight.

So our private label was running for quite a while about 1/3 of our revenues. It's a little bit higher than that. We don't break out specific numbers. It's a little bit higher than that, and it's still kind of trending along there. We actually had a pretty good quarter with branded sales, and we're seeing a little bit more success now winning some contracts and business around branded sales. So I wouldn't highlight too much with respect to that one. Margin-wise, we have a tendency to look at things at an operating margin level, and I know the operating margin on those are fairly similar. So from that perspective, it doesn't make too big of a difference. It could make a little difference on gross margins. Those contracts come through. They'll put a little pressure on gross margins probably as we move to the back half of the year.

And then on MyDay MiSight Japan, maybe can you size that in terms of the number of target practices you're going after? Like how many sites are you looking to penetrate? And what is the market size and dollar for MiSight in Japan?

So just to be clear on that one, like the product that got launched in Japan was just MiSight, the regular MiSight because it took us like 3 years to get regulatory approval on that. So MyDay MiSight is in multiple European countries right now. We just launched it in like Australia, New Zealand, South Africa I think, but Japan is the kind of the traditional, if you will, MiSight. As I mentioned on the call, it's like 77% of kids are myopic, so there's still a big opportunity there. It's really hard to gauge the size of that market and to put numbers out associated with it. But I will say we are super aggressive there right now, and I'm crazy happy to say that the product is being received really well. That's an ophthalmology market rather than an optometrist. So you have a marketplace of doctors who look at clinical data and they understand clinical data. And when you have that kind of combination of a lot of myopic kids and professionals who understand clinical data, a product like MiSight is going to do really well there. So I think that -- I talked about 20% to 25% growth from MiSight this year. We did 23%. And I would certainly be comfortable saying 20% to 25% again or higher based on the success that we're seeing early indications on MyDay MiSight and MiSight in Japan.

Our next question comes from the line of BNP Paribas from the line of Navann Ty.

One on CooperVision, if you could discuss MiSight, again, solid performance in light of the Stellest entering the market. And my second question is on the CooperSurgical. Your fertility pure-play peer had supportive market comments. So what are you seeing in IVF cycles across the U.S., EMEA and APAC?

Sure. I'll touch on the first one, which was the Stellest activity here in the U.S. That is going to turn out to be a positive for us. There is a lot more interest in myopia control, pediatric myopia issues, and the education that's coming because of Stellest, and the attention that the optical community is now putting on myopia control is quite a bit more than it was when it was just us pushing it. So there's going to be some push and pull from that because obviously younger kids are going to move into glasses much quicker. But when you look at, especially 11 and 12 year olds who are in sports or any activities or anything else concerned about their looks or whatever, like we're seeing an increasing amount of fit activity when it comes to kids in that 10 to 12 age in the U.S. market. So I think at the end of the day, that's going to be a positive for us long term. And I even think, this year, it's not going to be detrimental to us where I thought that it might be at one point. So I'm happy that product's in the market. I'm happy with what they're doing, and I'm happy with the promotional activity that's out there educating the marketplace. On the fertility side of things, yes, as I mentioned, I think the risk of the downside that was there and kind of that market continuing to trend down, I would take that off the table because we are seeing positives in the fertility industry now. We're seeing improving IVF cycles in the U.S. We're seeing improving IVF cycles in some of the European countries. We're seeing fertility clinics starting to look at upgrades and so forth as new technology comes out, new equipment comes out. So I would say that we're going to continue to see the fertility industry get a little bit better. I don't see like a fast, huge ramp-up or something like that. But I would say the downside has kind of taken off the table, and I would say, stabilization to improvement is what we're seeing right now.

From William Blair, our next question comes from the line of Steven Lichtman.

Al, you mentioned reinvestment in myopia control and it sounds like on the R&D side. Can you talk about the opportunities you see to build on the MiSight platform from an innovation perspective? And then I have a quick follow-up on free cash flow.

Sure. There's some really exciting stuff there. I mean, one is that we need to get a MyDay MiSight toric out into the marketplace. That is one of the products that the optical community really wants. So we're doing a lot of work on that right now. That's a positive. We have kind of like a MiSight 2, if you will, that we're working on to even get better efficacy. We've also got some really cool exciting stuff when you look at like combinations with atropine and so forth that are -- that have the potential to really, really help kids that are not reacting to kind of regular or traditional treatment. So yes, you're right. We're spending a decent amount of money in R&D on MiSight or myopia control in general, and we're going to continue to spend that because this is a great market. I mean we have opportunity to have that product continuing to grow a solid 20% plus for like years and years and years and years. So yes, we're investing in that pretty decently.

Great. And Brian, the upside you're seeing on free cash flow this year and the raised guidance, is that coming from higher operating margin, better working capital management, maybe all the above? What's exceeding your initial expectations heading into the fiscal year?

Yes, thanks for the question. Really, all of the above, we're seeing stronger operating performance, and I touched on that earlier. But we're collecting better. We're building inventory more smartly. I guess, smartly, that's a word. But we're building inventory in a more efficient manner. And FX is helping a little bit, but it's really just a combination of the operating performance and better working capital. Obviously, the lower CapEx helps, too.

Our next question comes from the line of Joanne Wuensch from Citibank.

I was fascinated to hear how my last name was going to get pronounced. A fundamental one and a bigger picture one, please. Foreign exchange, what are you dialing in with all of the shifting U.S. dollar given the macro environment? And then my second question, I'll just put it on right up front. How are you thinking about CSI revenue improving throughout the year? What are the drivers or levers that we can pull on that one or we can see you pull?

I'll answer the second one, and I'll let Brian answer the first one. So on the CSI side of things, we'll have like Paragard, which is down 7%, will finish the year kind of flat to up a little bit. So I think Q2 will be another year because -- or another quarter because of the comp where it will probably be down a little bit, but then we'll have a good like back half of the year with that product. When I think about like the medical devices, boy, our specialty surgical team is killer. Those guys are -- just do a fantastic job. So I think we'll continue to have strength there. And then as I was mentioning on fertility, just better visibility, more comfort in that, that market is at least stabilized and arguably trending up, is going to put some improving growth rates on that. So I think Q2 is better. I think, frankly, Q3 is better than Q2 for CooperSurgical, so just kind of progressing along with improvement, probably somewhat similar to Vision, where the best quarter will be the Q3, Q4.

So I'll take the FX question. As we were exiting last week, we were sitting to more favorable relative to last guidance on FX, but obviously, with the Middle East conflict, the dollar strengthened. And so as we thought about and as we set the guidance ranges for this earnings call, we took out the revenue ranges by $6 million of Vision and $1 million of Surgical, reflecting FX. But really, we kept the rates pretty similar to the rates from last earnings call. It's a little bit conservative. So really, we're looking at a headwind -- sorry, a tailwind to revenues of roughly 1% and also a tailwind to EPS of roughly 1%, so very, very similar to the last call.

Our next question comes from JPMorgan from the line of Robbie Marcus.

Two for me. First, Al, wanted to get your thoughts. First quarter organic growth missed on CVI guide and overall, and it sounds like second quarter will still be maybe a little weaker than original expectations due to Asia Pac. You talked about third and fourth quarter and a lot of the private label driving fourth quarter, and you didn't flow that all through in the original guidance. How are you thinking about sort of the conservatism of the guide now with the slower start to the year? And does the slower start maybe take some of the upside off the table as you left the guidance the same?

I would characterize that, honestly, the exact same because where we had that softness in Japan that I talked about, I mean, I can pinpoint that softness and talk about what happened there. And we have good, good visibility around what happened and how we're correcting that, but we have more strength in the Americas and more strength in EMEA than I would have said back in December. So I mean, I'd net that out and say, yes, we came in below our range and where we wanted to come in, in fiscal Q1. But I would say that Americas, stronger than when we gave that guidance in December. EMEA's stronger than when we gave that guidance in December. Asia Pac, probably pretty similar to where we gave that guidance because of a net positive of contract execution and product launches and wins offset by kind of the negative of the stuff I talked about. So net-net, I would put the odds of us being able to post a good year and so forth and success in the back half pretty similar to what we had in December.

Great. I wanted to go back to the question on the Paragard competitor. I realize deal hasn't closed yet and you're not ready to talk about the competitiveness here. But I'm guessing that wasn't included in the guidance. So did you include any competitive threats like that in the guidance for the year? I guess that's the question as we think about it.

So when we gave initial guidance, I can't remember. I thought I mentioned it on the December call. But when we gave the initial guidance, we assumed a negative impact because of the competitive launch and that it would happen at the end of this year. It's probably more likely that we will not have a negative impact, meaning that was a little conservative. But we'll see. I don't know. I mean, that thing hasn't closed, and we're in March already of our year. So we're working obviously well into our year at this point in time. So we'll see. But to confirm, yes, we had included that in the initial guidance of assuming kind of flat to up just a little bit.

From KeyBanc Capital Markets, our next question is from Brett Fishbin.

Hopefully, there's not too much feedback. Just wanted to circle back on the 1Q operating margin performance, which I think you noted in the press release was better than expected and obviously is a top priority this year. I was just hoping you could unpack a little bit in terms of what went better than you thought and why you were able to call the operating margins as exceeding expectations this quarter.

All the financial details of course. A big part of that was just good solid execution. I mean we did all that work in Q4, and we knew the team was going to do a good job with it and they have. Like organizationally, we've just done a really nice job. I would kind of highlight AI, and I hate to sound like one more person talking about it. But the reality is that our organization has embraced it. And this isn't our organization like all of a sudden right now getting on and training and everyone's going to train on it and so forth. Our organization embraced it last summer. And we started implementing that stuff as we were going through the year, and we're seeing positives come out of that type of work. The technology advancements at Cooper are fantastic. I'm super happy. And we have a lot more to do. This isn't a 1-quarter thing. So we saw some of it certainly in Q4. We're seeing those improvements in Q1, and we're going to continue to see the use of technology and AI advancements be a positive to us on our operating margins as we move through this year.

I guess not much to add to what Al just said. I mean we talked about, in Q4, we grew OpEx. It was basically flat year-over-year. And then here again in Q1, OpEx was roughly flat year-over-year. So there's a lot that we're doing to drive synergies and efficiencies, leveraging prior investment activity, and we're just really being very disciplined about fixed costs in the back office. And so we want to leverage IT. We're doing that much, much more than ever before, as Al talked about. And this is just great operational execution. Al talked about it and I talked about it in our prepared remarks, and I expect that to continue through the year.

Great. And then most of my questions were asked. Maybe I'll just ask one more on some of the new product launches. You mentioned several incremental launches that are really phased throughout this year, including MiSight in Japan, MyDay MiSight in Europe and in Asia, Energys, the toric multifocal. Are there 1 or 2 of these that you would call out as maybe the most exciting to you in terms of like just what they can do for company growth over the next year or 2 as they ramp?

You could kind of hear my excitement on MyDay in Japan and MyDay MiSight. I mean I still believe that there is a fantastic market out there in pediatric optometry in treating kids' myopia progression. And we've had that product. We got to a little slower start than I would have liked on that, and China has turned out to be pretty small in the grand scheme of things. But the rest of the world is gaining traction and doing well. And MiSight is back, and it is doing well. And with MyDay MiSight and the products that we have and the stuff in R&D and so forth, it's going to continue to do well for a number of years. So I'm really excited about that. On the MyDay side, it's execution. I mean that's what it is. Like I said, we got full product availability last summer. We finally got out there. We're executing a contract win, branded, private label. We're getting product launches done. All that stuff probably takes a little bit longer than you wanted to take, but it's execution, and that's what we're doing right now.

Next question comes from Nephron Research of Chris Pasquale.

And that was excellent pronunciation on that one. You nailed it. I had a couple of questions. One on fertility. You talked about improving cycles in the U.S. and Europe. You didn't mention China, which I think was a big piece of the weakness last year. So what are you seeing in that market? And are you still confident that it can bounce back to where it was historically?

I highlighted kind of the Americas and Europe, but Asia Pac and China, in particular, is still continuing to be not the greatest market in the world. It's not. I wouldn't say it's getting worse, but it's not. We're not seeing the improvements that we are in other markets around the world.

Okay. And then just on the capital allocation front, your debt leverage ratio is lower now than it's been in a few years. It's going to go down even further when you repay that portion of the term loan. As you think about your priorities and the pace of buybacks, is there a target leverage ratio that you think is appropriate for the business that would dictate kind of how quickly you go? You've still got, I think, close to $1 billion in authorization available.

Well, share buybacks are a high priority of ours right now given where our stock is trading. So I would envision us to continue to do share buybacks. And depending upon what happens with the stock price over -- after this and the next quarter and so forth, especially with our belief and our visibility in the back half of the year, I think you could see us get quite a bit more aggressive on stock buybacks.

From Redburn, our next question comes from the line of Issie Kirby.

You made an interesting comment at the end around looking at sort of next-generation manufacturing and production. Obviously appreciate it's early, but would love any more color around that. Do you think this puts you really ahead of your peers in terms of manufacturing capabilities? And then is this factored in, I guess, to the CapEx and free cash flow guidance over the next few years?

Are just world class. I mean, are best in class. They've been spending a lot of time and energy, especially in CooperVision over the last number of years, expanding facilities, starting new lines up and so forth. To be able to now take a breather and work with our great R&D team to look at next-generation work in deploying that and optimizing our infrastructure and so forth, like there's a lot of exciting stuff that we can do there. It takes time, but there's a lot of exciting stuff that we can do there as our CapEx comes down. And I think I'll turn it to Brian because I think that's all factored in on how he looked at free cash flow.

Yes, certainly. I mean we have a 3-year, 5-year, 10-year view on things. And so when we gave the free cash flow commentary and we reiterated again today over $2.2 billion, that factors that in. But we've talked about, over the years, as we're building, building, building to support more supply and capacity, it's hard for us to work on continuous improvement in these optimization things. And now we've got a breather, and we can do that. But there's lots of great ideas and lots of opportunities to drive success into the future.

Right. And then just really quickly, if I may, on SightGlass and the FDA approval. Any updates there? I know it seems to be performing well with Essilor in Asia. So I would just love to hear thoughts on SightGlass.

Yes. It's performing well in Asia. You're exactly right. We still love that product, and it's doing really well in Asia and a number of other markets around the world. So we love it, and we think it's going to do fantastic long term. No update though on an FDA approval.

Our final question comes from Goldman Sachs from the line of David Roman.

I'll keep it to one here given where we are in the time of the call. I think in your prepared remarks, you talked about some of the specifics you were seeing on OpEx efficiency, and I think you called out operating expense declines in CSI, which I know we'll see when the Q comes out here. But can you maybe just help us think through how you are reflecting on some of the G&A savings that you're realizing here from the restructuring you announced last year, to what extent you're contemplating reinvesting that and whether that is showing up in the P&L now? And then in a scenario you did go down a path of reinvestment, where would you be looking to deploy those resources?

I mean we are doing that. We're doing that already. I was talking about how aggressively we're doing that certainly on the MiSight side of things, and we certainly saw that in Q1. That's just putting dollars back into sales and marketing. That's where it's going, so leverage G&A, put dollars into sales and marketing, and we're getting enough savings through all of our work that we're able to do those reinvestments and still put up stronger than -- earnings than people were expecting. So that combination has kind of come together very, very nicely for us.

With no further questions in queue, I will turn the call back over to Al White for closing remarks.

Great. Thank you, operator, and thank you, everyone, for taking the time on today's call. We look forward to talking to everybody in 3 months and continuing to make progress and having a good call then. So thank you, and have a good night.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.